Using a credit card abroad can be quite costly once you take into account the hidden charges being incorporated into your transactions.

That great deal on a trip to Bangkok or New York could actually be costing you much more than you bargained for.

Foreign usage loading

When you spend on a credit or debit card abroad the exchange rate is based on the Visa or Mastercard wholesale rate.

This is extremely competitive and a much better rate than those offered by most foreign exchange bureaux.

Unfortunately, if you read carefully the terms and conditions of your credit card, there will be a reference to 'foreign usage loading'.

This is a commission that your credit card issuer charges when you buy something abroad.

The amount varies between credit card issuers and can be as high as 2.75%.

So if you are buying something worth �100, using the credit card to do this could add �2.75 to the cost.

It is certainly worth looking for a credit card that doesn't impose such a charge.

Cash machine costs

Your credit card will also enable you to take money out of cash machines while you are abroad, but it is worth proceeding with caution.

As well as the loading fee, there will be a cash-handling fee of around 1.5%.

Plus, in many countries, including the US, an additional charge of $1 or $2 can be added every time you use a cash machine.

So drawing cash on a credit card could cost you as much as �6 for every �100 withdrawn.

It's also worth remembering that if you withdraw cash on a credit card most cards will charge interest immediately without giving you an interest free period.

What are the best deals?

There are two cards that don't have any foreign currency loading. The Nationwide Visa card and the Lombard Direct credit card.

This means foreign exchange transactions on these cards are extremely good value.

The Nationwide card also has the lowest credit card cash handling fee of just �0.50 or 0.5% (whichever is less) and it's debit card has no cash handling fee.

How good are these cards?

The fact a card provides a cheap means of foreign exchange doesn�t necessarily mean it is a good card to use in the UK.

The Nationwide�s credit card interest rate is 14.6%, that is higher than the best standard credit card rates available.

However there is nothing stopping you from having more than one card - and for example just using Nationwide when abroad and then paying the bill immediately to insure there are no interest charges. (watch for interest on cash withdrawals).

It is worth noting that even with the foreign exchange loading even standard credit cards offer very competitive rates when compared to foreign exchange bureaux and are an efficient way to spend when on a trip.